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Ralphs Facing Trying Times in NoCal

COMPTON, Calif. -- Kroger-owned Ralphs Grocery Co., based here, is drawing fire in the press and the courts, as its plans to close 10 Northern California stores because of declining sales attracted vitriol from local labor groups, and it pleaded not guilty to charges of labor fraud.

January 30, 2006, 07:00 pm

COMPTON, Calif. -- Kroger-owned Ralphs Grocery Co., based here, is drawing fire in the press and the courts, as its plans to close 16 Northern California stores because of declining sales attracted vitriol from local labor groups, and it pleaded not guilty to charges of labor fraud.

The stores are scheduled to close in 60 days, according to Ralphs. The locations include Auburn, Capitola, Del Rey Oaks, Elk Grove, Freedom, Napa, Sacramento, Roseville, Santa Rosa, and Sonoma. Ralphs said it is in the process of looking for "suitable tenants" for the stores.

"These stores have been unprofitable for a lengthy period of time," Ralphs spokesman Terry O'Neil told the Santa Cruz, Calif. Sentinel. "We recently went through a review of the operations of all our supermarkets in the state of California, and in the review the decision was made to close these 10 stores based on their lengthy record of unprofitability."

Most of grocer's more than 300 stores are in Southern California, along with its headquarters. The company entered Northern California in the late 1990s, after acquiring stores there following the Albertsons Inc./American Stores Co. merger.

Ralphs has not yet disclosed whether employees would receive severance pay or which companies are currently interested in buying the stores.

Meanwhile, local labor officials responded defensively. "We are disappointed by Kroger's decision to minimize their presence in this market," said Jacques Loveall, president of UFCW 588-Northern California, which represents 30,000 members, in a statement. Noting that Ralphs' collective bargaining agreement requires the retailer to meet with the union and negotiate the impact of the closures, Loveall added, "We will ensure that our members will get all that they're entitled to."

Ralphs' plea of not guilty, meanwhile, was filed in federal court in Los Angeles, where the chain was arraigned on charges that it hired locked-out workers during the nearly five-month Southern California grocery strike, which began in 2003. The 53-count federal indictment returned in December against Ralphs includes identity fraud, money laundering, and obstruction of justice. If found guilty on all counts, the company could end up paying $200 million in fines and back wages. The next court date was set for March 6.

According to a report from Reuters, prosecutors said yesterday that their investigation into Ralphs was continuing, and that additional indictments might be forthcoming. The indictment accused Ralphs of falsifying thousands of employment records, including employee income tax statements. Kroger has disputed the charge that it had sanctioned the illegal hiring of workers.